Ontario Commission des 22nd Floor 22e étage
Securities valeurs mobilières 20 Queen Street West 20, rue queen ouest
Commission de l’Ontario Toronto ON M5H 3S8 Toronto ON M5H 3S8
IN THE MATTER OF
PALADIN ENERGY LTD (the Issuer)
PARTIAL REVOCATION ORDER
Under the securities legislation of Ontario (the Legislation)
Background
Paladin Energy Ltd (the Issuer) is subject to a failure-to-file cease trade order (the FFCTO) issued by the Ontario Securities Commission (the Principal Regulator) on October 4, 2017.
The Issuer has applied to the Principal Regulator for a partial revocation order of the FFCTO.
Interpretation
Terms defined in National Instrument 14-101 Definitions or in National Policy 11-207 Failure-to-File Cease Trade Orders and Revocations in Multiple Jurisdictions (NP 11-207) have the same meaning if used in this order, unless otherwise defined.
Representations
- This decision is based on the following facts represented by the Issuer:
a. The Issuer is a company incorporated under the laws of Western Australia on September 24, 1993.
b. The Issuer’s head office is located in Perth, Australia and is currently subject to a DOCA as described below.
c. As of the date hereof, the authorized capital of the Issuer consists of an unlimited number of common shares (the Common Shares) of which 1,712,843,812 are issued and outstanding.
d. The Issuer is a reporting issuer in the Province of Ontario and is not a reporting issuer or equivalent under the securities legislation of any other jurisdiction in Canada.
e. Since June 2016, the Issuer has been a “Designated Foreign Issuer” as such term is defined under National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers.
f. The Issuer was a dual Australian Stock Exchange (ASX) and Toronto Stock Exchange (TSX) listed company. Throughout 2016 and 2017, the Issuer attempted to restructure large portions of its debt that were coming due in 2017. Due to the Issuer’s ongoing financial difficulties, the Common Shares were suspended from trading from the TSX on May 18, 2017. On June 12, 2017, the Issuer requested voluntary suspension in trading of its Common Shares on the ASX. On July 3, 2017, the Issuer’s directors appointed KPMG as joint and several administrators of the Issuer under the Corporations Act 2001 (Australia), and on August 10, 2017, the Issuer’s Common Shares were delisted from the TSX.
g. The FFCTO was issued on October 4, 2017, due to the failure of the Issuer to file its annual information form, audited financial statements, related management’s discussion and analysis and officer certifications (the Outstanding Filings) for the year ended June 30, 2017. Under the Corporations Act 2001 (Australia), companies in administration are given automatic extensions to file audited financial statements.
h. On December 8, 2017, the Issuer entered into a deed of company arrangement (DOCA) with its creditors to implement a capital restructuring which is intended to enable the Issuer and its subsidiaries to continue operating as a going concern and have the Issuer reinstated to list its shares on the ASX.
i. The DOCA will, among other things, be comprised of:
i. a debt for equity swap whereby current shareholders (of which holders of approximately 8.5% of the issued and outstanding are resident in Canada of which the majority reside in Ontario) (the Shareholders) will transfer 98% of their Common Shares to participating creditors who hold approximately USD$678 million of the Issuer’s debt as of December 31, 2017 (the Share Exchange);
ii. an issue of USD$115 million of secured notes (the Notes); and
iii. payment of approximately USD$60 million in cash to acquire an outstanding debt facility.
j. There are a number of conditions precedent to the implementation of the DOCA, including:
i. Australian court approval of the Share Exchange;
ii. the Issuer obtaining necessary relief and exemptions from the ASX and certain other Australian government bodies; and
iii. the total amount of subscription proceeds for the Notes being held in escrow pending release upon satisfaction of all conditions precedent to the DOCA.
k. The Share Exchange was approved by an order of the Supreme Court of New South Wales on January 18, 2018 (Case number 2017/00375147).
l. Three creditors resident in Ontario (the Ontario Creditors) hold approximately USD$11.3 million of debt or approximately 1.7% of the total debt which will be exchanged for 34,006,260 Common Shares representing approximately 2% of the Common Shares outstanding after completion of the corporate restructuring. For the Share Exchange, the relevant parties will rely on the business combination and reorganization exemption contained in section 2.11 of National Instrument 45-106 Prospectus Exemptions (NI 45-106).
m. It is anticipated that the Ontario Creditors will subscribe for US$3.5 million worth of Notes representing approximately 3% of the Notes to be issued. For the Ontario Creditors’ subscription of Notes, the Issuer will rely on the minimum amount invested exemption ($150,000) contained in section 2.10 of NI 45-106.
n. The Issuer will use US$60,000,000 of the proceeds received from the sale of the Notes to purchase Deutsche Bank AG, London Branch’s rights and obligations under the revolving credit facility agreement with the remainder to finance the Issuer’s and its subsidiaries’ operations, including, without limitation, such amounts required after the closing to prepare and file the Issuer’s continuous disclosure documents under applicable securities laws in Canada to bring such filings, including the Outstanding Filings, and outstanding filing fees up to date with a view to applying for a full revocation of the FFCTO.
o. The Issuer is requesting the partial revocation of the FFCTO to allow:
i. the Ontario Creditors to receive approximately 34,006,260 Common Shares in exchange for debt in the amount of US$11.3 million pursuant to the terms of the Share Exchange; and
ii. the Ontario Creditors to subscribe for approximately US$3.5 million worth of Notes (and collectively with the Share Exchange, the Proposed Trades).
p. Upon completion of the DOCA and within a reasonable amount of time, the Issuer will apply to the Principal Regulator for a full revocation of the FFCTO.
q. The proposed trading in Ontario under the DOCA of the Common Shares and Notes to the Ontario Creditors cannot be completed without a partial revocation of the FFCTO.
r. Other than the trades in the Common Shares and Notes to the Ontario Creditors pursuant to the DOCA, no further trading of securities of the Issuer will be made in the Province of Ontario unless further relief from the FFCTO is sought by the Issuer.
s. The Issuer’s securities, including the Common Shares and Notes proposed to be distributed under the DOCA, will remain subject to the FFCTO until such time as the FFCTO is fully revoked.
t. The Issuer’s SEDAR and SEDI profiles are up to date.
u. Except for the outstanding filings and continuous disclosure defaults since the issuance of the FFCTO, the Issuer is not in default of any requirements of the FFCTO, the Legislation, or the rules and regulations made pursuant thereto.
v. Upon implementation of the DOCA, the Issuer will issue a news release and file a material change report announcing the issuance of the Notes and this Order.
Order
The Principal Regulator is satisfied that a partial revocation order of the FFCTO meets the test set out in the Legislation for the Principal Regulator to make the decision.
The decision of the Principal Regulator under the Legislation is that the FFCTO is partially revoked solely to permit the Proposed Trades, provided that:
a. prior to the completion of the trades of Common Shares and Notes to each of the Ontario Creditors, each participating Ontario Creditor will:
i. receive a copy of the FFCTO;
ii. receive a copy of this Order; and
iii. receive written notice from the Issuer, and provide a written acknowledgement to the Issuer, that the granting of this Order does not guarantee the issuance of any full revocation orders in the future and that all of the Issuer’s securities, including the Common Shares and the Notes, will remain subject to the FFCTO until it is revoked;
b. the Issuer undertakes to make available a copy of the written acknowledgement to staff of the Principal Regulator on request;
c. this Order will terminate on the earlier of:
i. the completion of the trades of Common Shares and Notes to the Ontario Creditors as set out in the DOCA; and
ii. 60 days from the date hereof.
DATED at Toronto, Ontario on this 25th day of January, 2018.
“Jo-Anne Matear” Jo-Anne Matear
Manager, Corporate Finance Ontario Securities Commission